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Amgen Inc. (NASDAQ:AMGN)

Q3 2013 Earnings Conference Call

October 22, 2013 05:00 PM ET

Executives

Bob Bradway - Chairman of the Board, President, CEO

Jon Peacock - EVP, CFO

Sean Harper - EVP, Research and Development

Tony Hooper - EVP, Global Commercial Operations

Arvind Sood - VP, Investor Relations

Analysts

Robyn Karnauskas - Deutsche Bank

Terence Flynn - Goldman Sachs

Eric Schmidt - Cowen and Company

Mark Schoenebaum - ISI Group

Michael Yee - RBC Capital Markets

Matthew Roden - UBS Securities

Geoff Meacham - JPMorgan

Ravi Mehrotra - Credit Suisse

Yaron Werber - Citi

Rachel McMinn - Bank of America Merrill Lynch

Geoffrey Porges - Sanford C. Bernstein & Co., LLC

Christopher Raymond - Robert W. Baird & Co.

Tony Butler - Barclays Capital

Eun Yang - Jefferies & Co.

Joel Sendek - Stifel Nicolaus & Company, Inc.

Howard Liang - Leerink Swann

Gene Mack - Brean Murray, Carret & Co.

Operator

My name is Marvin, and I’ll be your conference facilitator today for Amgen's Third Quarter 2013 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. There will be a question-and-answer session at the conclusion of the last speaker’s prepared remarks. In order to ensure that everyone has a chance to participate, we’d like to request that you limit yourself to asking one question during the Q&A session (Operator Instructions).

I’d now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Arvind Sood

Thank you, Marvin. Good afternoon, everybody. I’d like to welcome you to our conference call to review our third quarter financial results. This sure has been a busy year. It’s also been a great year so far as we’ve made remarkable progress against our strategic priorities.

I’m joined today by our Chairman and CEO, Bob Bradway, who will provide a progress update on our accomplishments. Following Bob, our CFO, Jon Peacock; will review our financial results for the third quarter and provide an update on our guidance for the remainder of the year. Tony Hooper, Our Head of Commercial Operations will then discuss our product performance during the quarter and trends that we see going forward. And finally Sean Harper, our Head of R&D, who will provide a brief pipeline update and after Sean’s comments, we should have ample time for Q&A.

We will use slides for our presentation today. These slides have been posted on our website and a link was sent to you separately by email. Our comments today will be governed by our Safe Harbor statement, which in summary says that through the course of our presentation and discussion today, we may make certain forward-looking statements and actual results may vary materially.

So with that, I’d like to turn the call over to Bob. Bob?

Bob Bradway

All right. Thank you, Arvind. We executed well through the third quarter and you can see that both in our financial and our strategic results for the quarter. Financially sales were up 11% and earnings per share were up 16% and off the back of this performance we’re raising our guidance for revenues and adjusted earnings per share for the full year.

A number of important pieces came together for our strategy over the past few weeks and I want to just quickly summarize them for you. In Japan our strategic alliance, which is known as the Amgen Astellas BioPharma KK has now begun operations and we’re developing five innovative molecules through the alliance, the first of which we expect to launch in 2016 and then ultimately of course we expect to establish our own wholly owned subsidiary in Japan as early as 2020.

In China our joint venture with Zhejiang Betta Pharma is now complete and we hope to launch Vectibix there together as early as 2015. We also announced our plans to build research and translational capabilities in China at Shanghai Tech University representing a step forward in our commitment to this market.

Consistent with our stated strategy of building a presence in some 75 countries, we’ve achieved that and more following the repurchase of rights to Neulasta and NEUPOGEN from Roche in markets outside of the U.S and the E.U. These markets account for about $200 million in NEUPOGEN and Neulasta sales and we will provide a platform for future product launches.

And finally of course we completed the acquisition of Onyx at the beginning of the month and now its still early days the transition is progressing smoothly and we’re excited about the prospect of adding value and driving growth in multiple myeloma with Kyprolis, which we think has significant opportunity in earlier alliance of therapy and in markets around the world as a best-in-class proteasome inhibitor.

Oprozomib looks attractive as well as a potential oral proteasome inhibitor for maintenance therapy in multiple myeloma and of course we expect Nexavar, Stivarga and Palbociclib to contribute to growth also.

While we were busy laying the ground work for long-term growth with our strategic moves during the quarter, our internal efforts were also progressing well. In R&D with the addition of Kyprolis and ivabradine, the innovative medicine for heart failure we licensed from Servier in July, our pipeline now includes 10 late-stage innovative programs set to generate pivotal data over the next couple of years.

Separately, our portfolio of six biosimilars continues to advance as well and we now have a pivotal trial underway for our second of these molecules, this one a biosimilar to Humira.

Some of you’ve asked about the status of the patent infringement lawsuit we filed in the U.S versus Teva on their long-acting lipegfilgrastim product candidate. Teva has advised us that they’ve withdrawn their PLA for the product and the FDA has confirmed this withdrawal, so we’ve agreed to dismiss our lawsuit on this product. Of course if circumstances change we can refile the lawsuit.

Before turning to Jon, I want to thank my colleagues in Amgen and our new colleagues from Onyx for their efforts during this past quarter. All of our focus on patients is evident in the strong operational and strategic results we produced over the last three months. Jon?

Jon Peacock

Thanks, Bob. This has been a busy quarter for us. We’ve advanced several of our most important strategic priorities as Bob has outlined. But at the same time, we’ve remained focused on our business and delivered a strong operating performance in the quarter.

Revenues advanced 10% compared to the third quarter of 2012 with product sales up 11%. This included a $155 million NEUPOGEN order from the U.S government. It also reflected continued momentum with Prolia, with XGEVA, Enbrel, and Neulasta as well as important contributions from Sensipar, Nplate, and Vectibix.

Operating expenses were up 10% on the quarter overall. Over the course of the last 12 months we’ve been enrolling multiple clinical trials, which will enable a data rich year in 2014 as several of these trials start to readout. At the end of the quarter, we had approximately 45,000 patients enrolled in our late-stage programs compared to around 30,000 twelve months ago. That’s an increase of 50%.

Research and development costs in the quarter were also impacted by a $50 million upfront payment to Servier for the U.S. rights to ivabradine. SG&A costs included 12% increase in Enbrel profit share payments, which amounted to $430 million. And as a remainder, the Enbrel profit share expires at the end of this month and is replaced by a 12% royalty on sales, leading to an anticipated net benefit of around $800 million in operating income in 2014 compared to 2013.

Net income increased by 13%. Our tax rate in the quarter was lower compared to 2012, benefiting from the federal R&D credit and a change in the geographic mix of expenses and revenues. This was partially offset by higher other income and expense. The third quarter charge for other income and expense is broadly representative of the charge that you should expect to see in the fourth quarter and into 2014. Adjusted earnings per share growth of 16% also benefited from a lower average share count.

Turning to cash flow and the balance sheet on page five, we generated $1.6 billion of free cash flow in the quarter and paid a dividend totaling $400 million. Our total cash and investments of $26.5 billion at the end of the quarter included a $3.1 billion bank loan to fund the Onyx acquisition, which was disbursed when the deal closed on October 1.

The funding for the acquisition was completed with a further $5 billion bank loan received and disbursed on October 1. With this, total debt outstanding at the end of the fourth quarter is expected to be $32.2 billion. And as a remainder, the $8.1 billion raised from the Onyx acquisition carries an interest rate linked to LIBOR, and at current rates, this amounts to 1.3% pre-tax.

Share repurchases year-to-date amounted to $800 million at an average price of $85 and following the Onyx acquisition, we don’t expect any significant share repurchase activity in 2014 and 2015.

Turning to page 6, we’re raising our guidance for the full year and this includes the contribution of Onyx from October 1. We now expect revenues to be in the range of $18.3 billion to $18.5 billion and adjusted earnings per share to be between $7.35 and $7.45. Our guidance on tax and capital expenditures remains unchanged. Tony?

Tony Hooper

Thanks, Jon. You'll find the summary of our global sales performance for quarter three on Slide 7. I'm pleased to report we had a strong quarter three with product sales growing 11% year-over-year and 1% quarter-over-quarter. We also saw strong top line contributions from all our geographic regions. Our U.S. business grew 12% year-over-year with wholesale inventory ending in the normal range. Outside the U.S., sales grew 7% year-on-year or 9% excluding foreign exchange.

I'd like to start the review with our portfolio beginning with Enbrel. Rheumatologists and dermatologists continue to recognize Enbrel with track record of efficacy, safety, and long-term experience. We are committed to investing in Enbrel over the long term given our prolonged exclusivity and the end of our profit share agreement with Pfizer at the end of this month. Enbrel sales grew 7% year-over-year, primarily due to price.

We remain focused on demonstrating the value and benefits of Enbrel to physicians, payors, and most importantly patients. Our direct-to-consumer advertising continues to emphasize the benefits of using Enbrel. Enbrel consistently leads total brand awareness in the rheumatology segment, and physicians continue to honor over 90% of Enbrel patient requests. We remain the value share leader in both the rheumatology and dermatology segments, and I'm confident in Enbrel's potential growth.

Moving now to Neulasta and NEUPOGEN. Please remember that Neulasta represents about 80% of the combined sales of these two products. We continue to emphasize the addition of filgrastim to the first and every cycle of chemotherapy as the best way to reduce the risk of febrile neutropenia in appropriate patients. Year-over-year, global sales for Neulasta increased by 9%. This was mainly driven by price and a slight increase in unit demand.

For NEUPOGEN, sales grew 50% year-over-year including the $155 million order from the U.S. government. EPOGEN sales were flat year-over-year. Quarter-over-quarter, sales declined slightly due to the favorable Medicaid rebate adjustment recorded in quarter two. Unit demand in the quarter was stable.

Aranesp sales were down 10% year-over-year. Quarter-over-quarter sales were negatively impacted by changes in estimates in both quarters including the Medicaid rebate adjustments recorded in quarter two. We expect Aranesp sales in both U.S. and Europe to continue trending slightly downwards.

Sensipar sales increased 7% year-over-year due to increases in overall unit demand driven by strong segment penetration. Nplate and Vectibix sales in aggregate were higher by 19% year-over-year due to increases in unit demand.

In Europe, we continued to pursue reimbursement with payors for the treatment of first and second line metastatic colorectal cancer, and our European label now includes the new NRAS data which allows more targeted treatment to patients based on their wild-type RAS status.

Turning now to the denosumab franchise. Prolia posted a 62% year-on-year growth. We did see, however, some seasonal softness in the third quarter something we have come to expect, but we continue to grow share in both the U.S. and the rest of the world. We also continued to improve repeat injection rates in the U.S. and our latest data shows over 60% of patients are returning for their second injection.

Earlier this month, we launched Prolia in France which is the largest PMO market in Europe. XGEVA global sales grew 5% quarter-over-quarter. In the U.S., our value share grew by 6 percentage points in the quarter. On a unit basis, our share grew by 2 percentage points, while competing against numerous generic zoledronic acid competitors. We now hold 42% unit share in this segment. Outside the U.S., XGEVA grew 12% quarter-over-quarter driven by share gains.

Recent launches in Europe continued its strong uptake. In France we already achieved 50% segment value share since launching in quarter one. Our commercial focus remains on reminding physicians and patients of the superior clinical profile of XGEVA.

Other products, which is comprised of our Brazilian and Turkish businesses declined 13% year-on-year. This was primary due to Turkey since this business is driven in part by government tenders where timing of awards tends to fluctuate. We expect sales to significantly rebound in quarter four.

Let me now turn to our new and exciting business Onyx Pharmaceuticals. I'll like to start by thanking the entire Onyx team for their unwavering commitment during the acquisition period. They remain focused and grew their business 6% quarter-over-quarter. Importantly, as most of their U.S. execution drove a 10% increase in the number of Kyprolis [ph] accounts during the quarter as the depth of prescribing continued to grow.

We're excited to continue building on this important growth platform in multiple myeloma with potential expansion into early lines of therapy as well as launching in countries outside the United States.

In summary, I'm very pleased with the competitive strategies our team have developed and our execution against these strategies. We remain focused on serving patients and bring them vital medicines. Our underlying business delivers another strong quarter and I believe we are well positioned to meet our full year revenue growth objectives.

Let me now pass it to Dr. Sean Harper.

Sean Harper

Thanks, Tony. We continue to forge ahead on our existing pipeline efforts and I'd like to take this opportunity to also welcome our colleagues at Onyx. The team has done an outstanding job advancing innovative multiple myeloma therapies and we're very optimistic about the long-term potential of Kyprolis and Oprozomib. We're looking forward to the new Kyprolis data next year including the final analysis of the FOCUS study in relapsed/refractory multiple myeloma.

In addition the Independent Data Monitoring Committee will review an interim analysis of the ASPIRE study in relapsed disease next year. As many of you are aware, FOCUS is the registration enabling study for refractory/relapsed multiple myeloma targeting the EU and ASPIRE is the confirmatory study for full U.S. approval as well as the registration enabling study for relapsed patients in both the U.S. and in EU.

We will also be presenting additional data on Oprozomib an oral proteasome inhibitor at this year's American Society of Hematology meeting. We are doing everything we can to help maintain momentum on these programs and to bring to bear any resources we can to further enable our success. The mission and culture of the two companies seem remarkably well aligned and I'm excited to have them on our team.

The lipid-lowering program intended to be the basis of registration for AMG 145 now called Evolocumab. It's completely enrolled and we eagerly await the results in 1Q '14. We plan to speak more about this program along with our other cardiovascular programs at an investor event at the American Heart Association meeting in November where we will be presenting one year data from over 1,100 subjects in our Phase 2 open-label extension study.

For Trebananib we continue to estimate the final overall survival analysis from the ongoing pivotal study in recurrent ovarian carcinoma to occur in the second half 2014. We have decided to discontinue enrollment in our study of Trebananib in combination with DOXIL in the study of recurrent ovarian carcinoma due to ongoing DOXIL supply issues.

We've also determined that a much smaller study than initially planned can be utilized to accurately assess the effects of Trebananib on progression-free survival and first line ovarian cancer. In addition, the emerging therapeutic landscape in non-small cell lung cancer limits the potential utility of Trebananib in this study, so we're also just continuing enrollment in this Phase 2 study. There were no new safety findings related to these decisions.

Our psoriasis program for Brodalumab consists of three Phase 3 studies, one placebo controlled and two head-to-head against ustekinumab or STELARA. I'm pleased to report all these are now fully enrolled and we expect to see the data next year.

Velcalcetide or AMG 416 is our novel IV calcimimetic being investigated for the treatment of secondary hyperparathyroidism in patients with chronic kidney disease who are on hemodialysis. Phase 3 data are expected next year and we will be presenting Phase 2 data at the American Society of Nephrology meeting next month.

Just to close the loop a few on outstanding XGEVA filing after extensive discussions with EU regulators, we've decided not to pursue further our request for a bone metastasis free survival indication in castrate resistant prostate cancer in Europe. Our biosimilar unit continues to make good progress and as Bob mentioned enrollment has commenced in our biosimilar Humira pivotal study in psoriasis.

Finally I’d just like to take a moment and acknowledge my colleagues in R&D who continue to innovate and execute at a very high level. We’ve made great progress this year, and as you can see from my last slide eight of our late stage programs will achieve significant milestones next year. We’ll be very busy in 2014, but our organization is ready and we look forward to continuing our track record of delivering noble therapies for patients in need. Bob.

Bob Bradway

Okay. Thank you Sean. Marvin, we’re ready for questions. If you’d remind our listener’s of the procedures, we’ll open up the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Robyn Karnauskas with Deutsche Bank.

Robyn Karnauskas - Deutsche Bank

Thanks for taking my question. So I guess, I think big picture seems like your base business continues to be more stable than I think a lot of people on the Street expected, and you’re continuing to grow your pipeline, and you -- like you did a deal today going into emerging markets. I guess, I’m just trying to -- I’m struggling with understanding the impacts the new businesses have on margins, and what the real revenue opportunity is for global expansion. So, I know you haven’t given guidance, but maybe in a general sense can you help me think about when you think global extension will contribute meaningfully, and how do we think about maybe bookends for margin impact. And then lastly, when do you think it's appropriate to give guidance on these businesses -- more detailed financial guidance?

Bob Bradway

Okay. Thanks Robyn, there are a couple of questions there. Why don’t we try and answer that in two parts. First you’re right, we’ve continued to make progress in laying the groundwork for our future growth, and we felt for sometime that an important ingredient for our long-term success was international expansion, and in particular a clear path forward in Japan, China, and the other key emerging markets, and we’ve made tangible progress as reflected in the items that we reviewed from this quarter. So, we feel good about the presence that we created and the ability to leverage that presence for our innovative molecules when they’re ready to be launched. As regards to your question about margins and returns; why don’t I ask Tony to share his thoughts? We’re obviously not going to provide individual market guidance, and Robyn I think the next opportunity for us to talk more generally about guidance would be in connection with our fourth quarter results which is scheduled for January of course the next year. Tony, do you want to offer any general thoughts to Robyn on how we’re thinking about markets and the criteria for profitability that we’re holding the teams accountable to?

Tony Hooper

So as we think about the Amgen presence at the moment we do have a fairly decent presence already in the Middle East, North Africa, and Latin America. Our business in this part of the world is really well in excess of $0.5 billion and growing rapidly double digit. The products we have in the portfolio also are highly sophisticated biotech type products, so pricing is pretty much in line with the type of product we bring to markets, so we’re not competing in these markets in the mass part of the market, but clearly around the high medical need with prices that will allow our margins fairly close to the type of business we run in Europe at the moment.

Bob Bradway

Okay. Let’s go to the next question.

Operator

Our next question comes from the line of Terrence Flynn with Goldman Sachs.

Terence Flynn - Goldman Sachs

Hi, thanks for taking the questions. I was just wondering, first if you can provide us on your thoughts on the Kyprolis development program. Now that the deal is closed, particularly I would be curious in your outlook for both FOCUS and ASPIRE. And then in the event that FOCUS does not have a positive readout, how comfortable are you that ASPIRE will be enough to secure a label there? And then the second question I had was just, can you remind us of your strategy for your Humira biosimilar if the trial you’re running is designed to support worldwide filings including the U.S? Thanks.

Bob Bradway

Okay, Terence you’ve got a couple of questions here; let’s try to answer those. Sean, I suppose you might want to just share with Terence our thoughts about the global development plan at Onyx.

Sean Harper

Yeah, I think that the FOCUS and ASPIRE trials will read out next year, FOCUS in its final form and ASPIRE will have an interim analysis reviewed by the data monitoring committee, and if positive, we will see it, otherwise we’ll see the final analysis. I think that in the case that FOCUS is really focused on a third plus line indication for Europe and we feel that it's quite an independent thing from the goals of ASPIRE which are to allow a relapsed population or if you will second line population to have a registration path in both the U.S. and EU, and we’re pretty confident that assuming the results are what we’re hoping for that that stands on it's own from a regulatory perspective.

Bob Bradway

And Tony, on Humira you want to answer Terence’s question?

Tony Hooper

Sure, I mean our biosimilar strategy is clearly a global strategy. We are working closely with the FDA to understand requirements. We understand what's required in Europe, and then we’re working with other countries outside those two regions to try and understand where the pathway is going forward, but we think globally on a consistent basis, yes.

Bob Bradway

Okay, Marvin lets take the next question, and maybe you can just remind the audience to just limit themselves to one question please, so you can get through everybody.

Operator

(Operator Instructions) Our next question comes from the line of Eric Schmidt with Cowen and Company.

Eric Schmidt - Cowen and Company

Thanks. Maybe just a quick one on Bob’s comments around Teva and IP dispute around long-acting GCSF, could you remind us when your patent actually expires and whether Teva withdrew the PLA because of the patent or for some other issue?

Bob Bradway

Eric our IP on pegylated filgrastim extends through the end of 2015, and as I said in my remarks, we understand that they have withdrawn the product from -- withdrawn the file rather from the FDA, and that’s the reason why we dropped our lawsuit.

Eric Schmidt - Cowen and Company

Do you know why, Bob?

Bob Bradway

You would have to ask them that question.

Eric Schmidt - Cowen and Company

Thank you.

Bob Bradway

Thanks.

Operator

Our next question comes from the line of Mark Schoenebaum with ISI Group.

Mark Schoenebaum - ISI Group

Hey guys; thanks for taking the question; I know that CMS has proposed cuts to reimbursement rates to dialysis providers. I think this came up on the 2Q call, I think at the time we were in the comment period. I was wondering if you can update us on what's going on there and if you can help us all understand an issue what impact it could have to models, and then if you could just comment on the NEUPOGEN government purchase, should we think of that as one time? Thank you.

Bob Bradway

Okay, Tony.

Tony Hooper

So let me talk about the bundle. The time for comment to CMS is now expired, and we have assumed that the CMS would make some type of ruling early in November. We’re not quite sure how the government shutdown will impact that timing, but we’re standing by to wait to hear what's going to happen. Now their decision could be to implement immediately. It could be to implement over a period of time, or if you implement in at a time in the future. We don’t know yet what the impact will be or how much the proposed reduction will in fact be. So we’re just waiting for that at the moment. On NEUPOGEN?

Bob Bradway

Sure, on the government order Mark, I think at this point we can’t predict whether there will be future orders from the government or not. I think we would notice that we’ve got a track record – strong track record of being able to supply customers with safe, reliable, quality NEUPOGEN, Neulasta product, and if the government wants to order more, we’re prepared to supply it. But at this point, I wouldn’t want to speculate as to whether there’ll be future orders.

Mark Schoenebaum - ISI Group

Thanks.

Operator

Our next question comes from the line of Michael Yee with RBC Capital Markets.

Michael Yee - RBC Capital Markets

Hi, just to confirm one, the pegfilgrastim application was withdrawn, but are we still expecting both a NEUPOGEN like in a non-peg Neulasta like product to come from Teva soon and both under settlement. Maybe you could clarify if you expect both of those to come and how we should as investors be expecting your franchise to look once those do arrive to market?

Bob Bradway

Okay, a couple of things Michael just to remind you. We expect that there will not be a NEUPOGEN like product on the market before mid November after that time when our intellectual property expires on NEUPOGEN we would expect to see Teva launch a product, and I would note it won't be a biosimilar and it won't be a product that has the same label as NEUPOGEN. With respect to other long acting products, again so far as I’m aware none are registered and so rather than speculate on what they might do, I think we’ll wait and see what the regulatory reaction is to products that they have on file.

Operator

Our next question comes from the line of Matt Roden with UBS.

Matthew Roden - UBS Securities

Great. Thanks for taking my question as well. Sean, as you know, I've been interested in this ovarian program with Trebananib. Just want to ask you about the DOXIL shortage which necessitated the closing of enrollment for TRINOVA-2. Just wondering if you can talk about whether or not that impacts your statistical power to hit PFS in OS, whether or not the second study is required for approval in the indication and whether there are other implications we should consider here? Thanks.

Sean Harper

Yes. Matt, I don't think the DOXIL study was always a non-registration trial to suggest some – generate data in the setting of a very commonly used agent in ovarian cancer and so there really are two problems. One is that it's not really very commonly used agent in ovarian cancer anymore because it's so unreliable on supply and we can't get the drug. This is the second time we've had to do this and it's just very disruptive to not have supply for patients in a clinical trial setting. So that should have no variant all along our ability to register the product, to access OS in the existing independent study with the paclitaxel background that we're waiting for sometime next year nor would it have an ability to assess PFS in the first line study which has always been the primary goal of the first line study.

Matthew Roden - UBS Securities

Great. Thanks very much.

Sean Harper

Sure.

Operator

Our next question comes from the line of Geoff Meacham with JPMorgan.

Geoff Meacham - JPMorgan

Hi, guys. Thanks for taking the question. So Sean highlighted on Slide 9 all the data events for next year but I want to ask Tony the commercial perspective on this. Is there an ROI that you're looking for, for the various Phase 2 or 3 assets that you have that are maturing? I guess said another way, just given your top line is there a threshold that these assets have to cross to really sort of move that, I think?

Bob Bradway

Geoff, this is Bob. Let me jump in there on the question that you directed at Tony. Our intention is to advance molecules for which we think we can exceed the cost of our capital. So when we look at our late and early stage programs, we want to have a clear view to what's it going to take to beat our cost to capital and we think we're in good shape in that regard on the late stage molecules and we continue to watch that carefully on the mid-stage and early-stage programs.

Geoff Meacham - JPMorgan

Got you, okay.

Operator

Our next question comes from the line of Ravi Mehrotra with Credit Suisse.

Ravi Mehrotra - Credit Suisse

Hi. Thanks for taking my question. Another big picture question on your biosimilar assets, when can we expect more news flow on the other five projects you previously identified and given the changes in the biosimilar competitive environment since your business review day, do you view this opportunity as bigger than you guided to at that point? Thank you.

Bob Bradway

Ravi, why don't we answer this in two parts. With respect to communications, again as our biosimilar molecules enter pivotal trials we'll plan to call them out on our quarterly calls as we did today, so we've done that for both the molecules that are now in pivotal trials and Tony, if you want to talk more generally about the quality of the opportunity here jump in.

Tony Hooper

So as we monitor these six assets we've identified, all of them continue to grow globally. So the medium-term opportunity of playing with markets continues to be a lucrative market. We continue to believe that our ability to bring to market a high quality reliable supply product will be unique benefit that Amgen has. So we continue to see it as an opportunity, yes.

Ravi Mehrotra - Credit Suisse

Thank you.

Operator

Our next question comes from the line of Yaron Werber with Citi.

Yaron Werber - Citi

Hi. Thanks for taking my question. I have kind of also a little bit of a challenging question relating to cardiovascular franchise and just on 145 – just give us a little bit of an update where you are on formulation and sort of are you guys thinking that the concentration will remain the same but the device is going to change into an auto injector? And then where does Ivabradine, what does that fit in and is it based on – you going to be looking for CAD and the chronic heart failure indication, kind of what's the strategy? It sounds like you're going to be using previous data to file? Thank you.

Bob Bradway

Okay. So regarding 145, as I said many times before, this is a very competitive situation and we're not wanting to get into that level of specificity around how we're going to be presenting the agent. Its suffice it to say that we think we're going to have good ways of delivering to patients every two week and every week presentations of the product. Ivabradine is a really interesting molecule that is unique in its mechanism and has a really critical role in the management of heart failure outside the United States. We have data sets which are very robust supporting chronic heart failure whether as a large outcome study that was done not too long ago, put into the labels around the world. European heart failure guidelines include the use of Ivabradine in patients who can't be adequately heart rate control but with beta blockers. So our desire is to see the agent registered ultimately and in both of these indications in congestive heart failure as well as in patients with coronary artery disease and stable angina. There is also a large outcomes trial with in-patients with coronary artery disease, approximately 20,000 patients that's going to read out next year which should potentially quite supportive to the use of the agent in the kind of angina indication. So that's…

Sean Harper

Tony, do you want to add some thoughts?

Tony Hooper

Yes, so as we think about Amgen launching 145 which is one of our largest exciting opportunities we have that would have been the first time Amgen competes in the cardiovascular field and therefore Ivabradine which has shown the same, being a unique opportunity, a unique mode of action in an area of high unmet medical need will allow us prior to the 145 launch to build competencies, skills in our organization to build a relationship with the cardiology group, make sure we understand the hot rolling interaction of the PMT committees, discharge protocols all of which will play in line with the launch of 145. So setting us up, getting us the experience at the same time driving a rather exceptional product in a large unmet medical need.

Operator

Our next question comes from the line of Rachel McMinn with BoA Merrill Lynch.

Rachel McMinn - Bank of America Merrill Lynch

A question, I wanted to go back to Kyprolis, I was hoping Sean you might be a little bit more granular on your development plans I guess on two fronts. One, with the head-to-head studies it seems like – for ENDEAVOR and CLARION there are going to be important for frontline approval but also potentially for EU reimbursement given the cost concerns with Revlimid and Kyprolis, I guess my view is that these studies are fairly risky. Do you plan to make any changes to the design of these studies or add additional supplemental studies? And then just on the cardiac pulmonary safety profile given the recent events with [indiscernible], I'm just wondering what your comfort level is on the safety profile and how confident are you based on the data that you have to say that there's not going to a safety imbalance that stops either those studies early? Thanks.

Sean Harper

Well, first I'd say that generally as we look at the Onyx opportunity, we were very impressed with the development program and I see the development program as being quite well thought out. Of course we'll work with our colleagues that makes them think about details of the way that statistical analysis plans are done and this sort of thing. At a technical level for sure there will be a process of looking to gather things, but I think that generally speaking we feel very good about the development program which has been developed with a lot of input from the experts in the field from around the world and regulatory authorities of course. It's always possible that we would add studies. I wouldn't think that there is anything that glares out as a missing piece but there are lots of opportunities to do additional studies with a smaller dose with both Kyprolis and Oprozomib and we'll just have to think about that in a big picture perspective in terms of return on investment, overall portfolio management. Safety I think I can't give you any guarantees about safety, I mean, we -- the data that we see to date with the agents is reassuring and appears that the benefit that’s being derived from the use of the product in a setting exceeds the safety concerns. There are of course especially in oncology safety issues with virtually every therapeutic agent. So I still see a very strong benefit risk profile here and I think that the opportunity to let these studies play out and see what we learn from them is that -- is in front of us.

Bob Bradway

Okay. Let’s go to the next question Marvin.

Operator

Next question comes from the line of Geoffrey Porges with Sanford Bernstein.

Geoffrey Porges - Sanford C. Bernstein & Co., LLC

Thanks for taking the question. I just had a question about the Onyx acquisition. I mean if we look back at Onyx, it had about $200 million in operating expenses in Q2 and now you had a chance to integrate the two organizations. Could you give us a sense of what that operating expense might be looking up like in Amgen’s hands, say a year from now once you’ve kind of embedded everything in? Thanks.

Bob Bradway

Sure Geoff. I guess we’re 21 days into this transition. What I had observed is that as I said earlier, the transition is moving smoothly. There are clearly going to be some opportunities for us to think about synergies and as you would expect we’re down the road already in that regard with our colleagues at Onyx, but I’m not going to provide guidance at this point. We will have an opportunity to do that next year in January when we talk about the fourth quarter in the way that we typically do. But again, I think the big picture Geoff is that we’re three weeks into this. We feel good about what we’ve seen, I think feel good about the way in which we’re working together and comfortable about the opportunity to help drive growth here and create value both from things that we can do to grow the brand and grow access as well as things that we can do to provide cost synergies.

Geoffrey Porges - Sanford C. Bernstein & Co., LLC

Okay.

Operator

Our next question comes from the line of Chris Raymond with Robert Baird.

Christopher Raymond - Robert W. Baird & Co.

Yet another sort of cardiovascular question for AMG145, so we’ve picked up a lot more investor interest recently on Merck’s upcoming improve the trial and I know this is not your trial, nor your product, but there is I think a fairly decent chance that there is going to be a read through at least from an investor standpoint if that trial fails and I know these mechanisms are very different. But can you may be just give us a sense, how should we be thinking about how the FDA might be thinking, if indeed that trial doesn’t show up, sort of a long-term benefit and what the implications are for what they might require for the entire PCSK9 class? Thanks.

Bob Bradway

Yes, I think it’s obviously difficult to speak for the FDA, in terms of how they might view LDL as a surrogate endpoint based on the results from one of dozens and dozens of studies that have been done and have shown that reducing LDL has had a solitary effect on cardiovascular outcomes. I think it’s just going to depend enormously on the actual interpretation, detailed scientific interpretation of studies in -- like improve it. I think those studies will be looked at carefully, any studies that come out over the next few years will be looked at carefully by regulators and the scientific community. But it’s really down to the detailed assessment as to whether the results actually call in to question whether LDL is a reasonable surrogate for cardiovascular outcomes, while one waits for cardiovascular outcomes result to come from a trial, which is well under way. And it’s just tough to speculate on that at this stage, but I think that it’s clear to me that LDL is looked at differently than other lipid parameters by regulators with respect to being the most robust of those.

Christopher Raymond - Robert W. Baird & Co.

Thank you.

Operator

Our next question comes from the line of Tony Butler with Barclays Capital.

Tony Butler - Barclays Capital

I have a question, Tony you’ve commented about, how well Enbrel has done not only in this quarter but in past quarters. Yet in the last quarter you made a reference to some slowdown in the [indiscernible] markets, so I wondered if you could actually break apart how you’re looking at the growth rates around each indication for Enbrel would be very helpful. And if I could sneak in a second really quickly, it's again around 145, in your comments earlier around of ivabradine you made some references to the cardiologist and I wondered if in fact your assumption was that 145 would not be used by the primary care physician or did I simply misread that from your statements in chronic heart failure? Thanks very much.

Tony Hooper

Okay, Tony at regards to Enbrel about two thirds of our business is in rheumatology and about one third in dermatology. Net-net we’ve seen both these markets just slowdown a little bit in terms of growth, this was growing fairly healthily. In rheumatology we clearly continue to hold market share. In dermatology we have seen a slight decline in market share over the last couple of quarters or so, but we clearly believe that the product profile both in rheumatology from an efficacy and a safety perspective as well as our profile in dermatology specifically here around safety will allow us to continue to maintain a fairly large market share as we go forward. As regard to 145 the assumption we’re making is the initial launch of 145 will be more specifically on high risk patients which will be treated by cardiologists. As always there’ll be a smattering of general practitioners who do a fair amount of cardiovascular work, but we don’t see us going in the early stages to a large GP market.

Tony Butler - Barclays Capital

Thanks very much.

Tony Hooper

Okay.

Operator

Next question comes from the line of Eun Yang with Jefferies.

Eun Yang - Jefferies & Co.

Thanks. Question on Brodalumab. I’m assuming two Phase 3 trials are designed to show superiority over STELARA in psoriasis, and the fact that Novartis issued a superior efficacy over Enbrel with their IL-17 antibody. Why did you use STELARA as a competitor versus Enbrel?

Sean Harper

Well, I think the choice of ustekinumab as the competitor for Brodalumab was really a matter of just putting ourselves up against the molecule that we thought has the increasingly is becoming the agent of choice from an efficacy perspective in the disease if we wanted to set as higher bar as we could really from a competition perspective and so that was in part why we made the choice. And we could have chosen other comparators but that was the choice that we made.

Bob Bradway

Good. Let’s go to the next question.

Operator

Our next question comes from the line of Joel Sendek with Stifel.

Joel Sendek - Stifel Nicolaus & Company, Inc.

Thanks Bob. So I had a question of Kyprolis sales and obviously you seem pretty happy about the $65 million it looks to me pretty flat over the last couple of quarters, I am wondering if the -- now the drug is in your hands whether we should expect or if there’s any significant growth embedded in your guidance for the fourth quarter or do we need to wait for the new studies to come out next year? Thanks.

Tony Hooper

Joel, its Tony. So let me just say a couple of things. The first leak of a potential acquisition started to come out in late June. So there’s a fair amount of uncertainty amongst Onyx employees for a period of time and as I said in my remarks earlier, I am pretty grateful in spite of this terrible disruption that happened in their lives they maintained the business as well as they did. Including the third quarter it's normally a fairly soft quarter even for oncology. 14 days after the close we had in the hands of every single field based employee a letter of employment confirming employment. We have looked at this team. This team has obviously been put together with a clear knowledge of where the multiple myeloma market is, where the treatment physicians are and we’ve hired through the Onyx team a top class oncology sales organization and medical field organization. We're certainly hoping that with certainly now bringing on their lives that performance will improve over the fourth quarter but clearly as you look to the medium to long-term, the next major expansion of the Kyprolis label will come with both the FOCUS and the ASPIRE ideas.

Joel Sendek - Stifel Nicolaus & Company, Inc.

Okay, thanks.

Operator

Our next question comes from the line of Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann

Thanks very much. Regarding the changes in the Trebananib program, can you comment on whether these represented in any way a de-emphasis of this compound, specifically regarding focusing – the focus on frontline study on PFS, are you still pursuing a regulatory following in the U.S. for frontline? And then the second, the TRINOVA-1 study can you talk about your outlook record filing given the interim overall trend they presented?

Bob Bradway

No, I think we're still quite interested in Trebananib potential and see it as an agent which could gain registration globally for first line and recurrence feed. So in the first line I think we recognize that it's extremely difficult as I'm sure you know to try and achieve an overall survival result in the first line. Our general thought is that if we can achieve an OS result in a significant line of therapy like in the recurrence study that we're waiting for OS data now, that that would be sufficient for the molecule to allow us to move forward with attempts to register in first and second line globally. So that's really the strategy and the change in the size of the first line study doesn't diminish in any way our ability to access the progression-free survival there.

Jon Peacock

Marvin, I think we have exhausted a lot of topics here, so why don't we take one last question.

Operator

Last question comes from the line of Gene Mack with Brean & Capital.

Gene Mack - Brean Murray, Carret & Co.

Thanks so much for taking the question. Just on Oprozomib and strategy there, wonder if you guys can give us the sense of – just given how fast Millennium moved their oral compound 9708 through Phase 3 testing, I'm just wondering how soon do you think you might be able to get in to a pivotal program with Oprozomib? Is it just too early to tell at this point or can you like Millennium go sort of from Phase 1 to really big one from Phase 1 to Phase 3? Thanks.

Sean Harper

Yes, I think it's probably just too early in the process for me to speculate about that right now. The agent is really at the threshold between Phase 1b and 2 at the moment. I'm sure there are – there's an ability to be aggressive with the development of the molecule but we also want to do it right and skipping phases of development isn't always the best idea. So we'll have to needle through that and decide how we're going to proceed.

Arvind Sood

Great. Thank you, Sean. So let me thank everybody for your participation in our call this afternoon. As you sip through all this information, if you any questions, any other comments, let's continue the dialog. I together with the rest of my team will be around for the next several hours so feel free to call. Thanks again.

Operator

Ladies and gentlemen, thank you for joining us for Amgen's third quarter 2013 financial results conference call. This concludes today's conference call. You may now disconnect.

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